The difficulties of trying to resist recognition of a judgment from another EU member state court on the basis that it is manifestly contrary to public policy have been demonstrated in a recent decision of the Court of Justice of the EU: Diageo Brands BV v Simiramida Case C–681/13.
It is not enough to show that the decision is wrong, whether as a matter of national or EU law. There needs to have been a manifest breach of a rule of law regarded as essential, or a right recognised as fundamental, in the legal order in which enforcement is sought. Whilst the CJEU will not define the content of public policy of a member state, it will review the limits within which EU courts have recourse to the concept, so in effect will police its application where references are made to the CJEU.
On the facts of the case, an alleged error of the Bulgarian court in applying a trademark Directive did not meet this test.
The decision also makes clear that, save in exceptional circumstances, a party should exhaust all appeal avenues in the country giving judgment before seeking to rely on a breach of public policy to prevent enforcement.
Under the Brussels regime, a judgment of a court in one EU member state must be recognised and enforced in another member state unless the party resisting recognition can establish one of a number of limited grounds. These include that recognition of the judgment would be manifestly contrary to public policy in the member state in which recognition is sought (article 34(1) of the Brussels Regulation, No 44/2001 – now article 45(1)(a) of the recast Brussels Regulation, No 1215/2012).
In this case, Diageo Brands obtained an order from the Bulgarian court for the seizure of bottles of whisky bearing the ‘Johnny Walker’ brand on the basis that their importation into Bulgaria from outside the European Economic Area infringed its trademark. That order was subsequently overturned and Diageo’s appeal to the Bulgarian Supreme Court was unsuccessful. Diageo also failed at first instance in its substantive claim for infringement of its trade mark and did not appeal against that decision, which therefore became final.
Simiramida commenced proceedings in the Netherlands for compensation for the damage it claimed to have suffered as a result of the seizure, relying on the decision of the Bulgarian courts. In its defence, Diageo argued that the Bulgarian judgment should not be recognised as it was manifestly contrary to public policy within the meaning of article 34(1). This was on the basis in part that the Bulgarian court had misapplied EU law.
The CJEU observed that article 34 had to be interpreted strictly. The rules of recognition and enforcement are based on mutual trust, and judicial decisions in one member state should be recognised automatically in another member state. Article 36 makes clear that a judgment cannot be reviewed as to its substance on enforcement.
As regards what amounts to public policy, as explained in previous decisions (see for example flyLAL-Lithuanian Airlines Case C-302/13), it was not for the CJEU to define the content of the public policy of a member state, but it was required to review the limits within which EU states could have recourse to that concept.
It made no difference whether the alleged error concerned a rule of EU law rather than national law. In both cases, for the public policy exception to apply, there needed to be a breach of a rule of law regarded as essential in the legal order of the member state in which recognition was sought, or of a right recognised as being fundamental in that legal order. That would include essential laws or fundamental rights recognised as such by the EU legal order, as public policy of the EU forms an integral part of the public policy of member states. That test was not met in respect of any error in applying the trade mark protections being considered in this case.
The CJEU went on to say the court in which recognition is sought must take account of the fact that, save where specific circumstances make it too difficult or impossible to do so, the party alleging a breach of public policy must avail itself of all the legal remedies available in the country giving judgment, with a view to preventing an error before it occurs. If Diageo had appealed, any error could have been corrected by the appeal court. At the Bulgarian Supreme Court level, the court would have been obliged make a reference to the CJEU if there were a doubt over the interpretation of the EU Directive in issue.